Title Insurance on an Ontario Home Purchase: Is It Required?

Shortly after you sign an agreement to buy, someone will likely ask whether you want title insurance. It is one more cost on top of everything else, so it is fair to ask whether you really need it.

This article explains what the law says, what a standard policy generally does and does not cover, and how to think about it next to a traditional survey.

Is title insurance mandatory in Ontario?

No. Title insurance is not required by law in Ontario. Your mortgage lender may have its own requirements, so check with them. If you are buying with a mortgage, the lender may ask for a policy that protects it.

There are two separate products. An owner's policy protects you as the owner. A lender's policy is a different product that protects the mortgage lender. Buying one does not give you the other, so confirm which policy is being quoted.

What a standard owner's policy generally covers

• Hidden defects in ownership.
• Existing liens, such as unpaid utilities, mortgages or property taxes.
• Encroachments.
• Survey and public-record errors.
• Title fraud.

Title fraud is the case many people worry about: someone pretends to be the owner and transfers or mortgages the property. Policy wording differs between insurers, so ask to see the actual terms.

What it generally does not cover

A standard policy generally excludes defects you knew about before buying, environmental hazards, native land claims, zoning violations from later renovations, and problems unrelated to title. If you become aware of an issue before closing, tell your lawyer rather than assuming the policy will respond.

A victim of title fraud may also claim compensation from the government's Land Titles Assurance Fund. That is a separate route from an insurance claim.

Cost, and how it compares with a survey

The premium amount and when it is payable depend on the insurer and your situation, so ask your lawyer for the current figure. It forms part of the closing costs, which buyers are told to budget at 1.5% to 4% of the purchase price.

The two are not interchangeable. A survey shows you the facts, while insurance helps with covered losses. Some buyers get both, and your lawyer can tell you which makes sense for the property.

Other closing items to budget alongside the premium

Title insurance is only one item in your closing costs. It helps to see the others together so that no single figure surprises you on closing day.

• Land transfer tax is payable on every conveyance of land tendered for registration, so it is paid when the transfer is registered on closing.
• Ontario land transfer tax is calculated in brackets, and each rate applies only to the portion of the value that falls in its bracket.
• The value of the consideration includes the purchase price, any liabilities assumed, benefits conferred, soft costs and the cost of upgrades, but not HST paid on the purchase price.
• First-time homebuyers can get a refund of up to $4,000 if they are at least 18, have never owned a home or an interest in a home anywhere in the world, occupy the home as their principal residence within nine months of the transfer, and, for agreements signed after November 14, 2016, are Canadian citizens or permanent residents.

The first-time buyer refund has exceptions. If the buyer's spouse owned a home while married to the buyer, the buyer does not qualify, and neither spouse can get the refund. If joint buyers include someone who is not a first-time buyer, the refund is reduced and is proportionate to the interest acquired by the buyers who qualify. A buyer who is not a citizen or permanent resident at closing has 18 months after registration to become eligible and apply. The refund can be claimed at registration through the electronic land transfer tax affidavit, or you can pay the tax and apply to the Ministry of Finance within 18 months after the conveyance is registered.

Registration is electronic in Ontario, except for complex registrations. Only authorized Teraview account holders and their registered users, such as lawyers and conveyancers, can create and submit documents in the system. How the insurance decision fits into your own closing depends on your situation, so it is worth confirming with a lawyer.

What to do next

• Ask your lawyer whether your lender requires a policy and whether it is a lender's or owner's policy.
• Ask for the premium and the policy's exclusions in writing.
• Tell your lawyer about anything you know about the property's boundaries, work done or disputes.
• Ask whether an existing survey is available and whether it is current.
• Include the premium in your closing cost budget.

Frequently asked questions